The Scent of a Brand

When do powerful small brands outweigh powerful large brands?

CFO Magazine recently featured an interview with Gordon Stetz, CFO of McCormick & Co., the spice and flavorings company. The article featured a picture of Stetz seated in a grocery store aisle, his head barely visible amid the sea of his company’s famous brands.

The stated message of the piece is about McCormick’s three-part strategy for acquisitions, a sensible approach about which more here: CFO Magazine. What caught The Merger Verger was the unstated message of the photograph, the visual evidence of the company’s branding strategy post-acquisition.

Now, McCormick dates its history back to 1889 and its red and blue “Mc” logo is recognizable in every supermarket, McCormick logoconvenience store and bodega across the land.  Success like that often leads companies to a kind of ego-driven branding myopia.  “We are the great and powerful _______.”  (Fill in the blank.)  “We have the market power; everyone knows us; the value of our brand will add so much to these little guys.”

What bull.

The picture of Stetz tells a thousand words about McCormick: we buy brands because of their power not merely Jambalayabecause of ours.  If you purchased names like Zatarain’s or Lawry’s or Old Bay Seasoning and had to bring them into the fold of your huge and powerful uber brand, what would you do?

One of the toughest decisions a business person faces is the one to not do something bold.  We are bred for boldness, steeped in a culture of advancement, rewarded for our actions.  What idea is there that cannot benefit from our improvements?

In such a culture – magnified by the immense time pressures of integration – it takes both courage and objectivity to say, “No, I think we should just stay the course on this one.”

Is your integration process at risk of rushing headlong into failure?  Keep in mind the important step that McCormick seems to have mastered: stop and smell the fines herbes.

Afterword: “stay the course” does not mean “do nothing.” As a powerful, branded acquirer, there can be any number of actions to leverage a newly acquired smaller brand while leaving that name intact.  But those actions are all subordinate to the larger strategic objective of retaining the basic value that your company paid so much to obtain.

RIP Smith Barney: What’s in a Name?

Ah, branding!  So it’s good-bye to Smith Barney.  Off to that eternal reunion with Harris Upham.

Lots of Wall Street’s legendary names have morphed into history.  Many from their own greed and hubris (Lehman, Salomon, Bear and Drexel come to mind).  But others – and Smith Barney joins this list this week – from an acquirer’s marketing decision.

Rebranding is a commonplace part of the post-merger integration process.  In this case, The Merger Verger agrees with Morgan Stanley.  The Smith Barney name may have been venerable one day but it holds sway today only in the hearts of a small group of graying brokers.

I have watched and at times worked for companies that have acquired strong brands.  Sometimes the names were dispensed with almost immediately.  Other times not.  In the case of HSBC, for example, they owned merchant bank Samuel Montagu, broker James Capel, commercial bank Midland, and several other highly-regarded names in the UK banking/securities industry.  And they kept those names long after their acquisitions. 

HSBC utterly failed to build any degree of cooperative synergies between the units and in fact left the door wide open for tiffs and snits and spats and all manner of productive maturity.

Then one day, HSBC awoke from the Battle of the Logos and – poof! – St. Andrew’s cross was the winner.  All HSBC all the time.  In an article written at the time of the change, the Independent of London observed, “visitors to the HSBC dealing floor will bear witness to a different business logo on virtually every pillar.”  That is an accurate statement, I am here to tell you.  It was a mess.

Conversely, some years ago, Graybar, then mostly an electrical equipment distributor, acquired Hansen & Yorke, a small but successful industrial supply company in the New York area.  The target was to be the launching pad for Graybar’s expansion into the industrial supply sector.  Immediately after closing, the Hansen & Yorke name was jettisoned and replaced with “Graybar Industrial.”  It was a death knell.  Buyers of industrial goods knew the H&Y name, one with 35 years of real customer goodwill.  Sure the Graybar brand had recognition but as a faceless giant, not a service-oriented family company.

You would be wrong to conclude that The Merger Verger views little companies as good and big companies as bad.  This is a question of marketing and customer expectations.  Key word: expectations. 

Disturb the longstanding equilibrium that a target has maintained with its customers at your peril.  Brands and names in particular symbolize – evidence – that equilibrium … for better or worse.

These are issues of brand reverence, in the HSBC case too much for the target’s brand; in the Graybar case too much for their own.  HSBC’s mistake was to let the old brands linger too long, let the culture of uncoordinated independence take root under the new ownership structure.  Graybar’s mistake was to disrespect the degree of customer goodwill that a little guy’s brand can represent.

When you boil a name change down to its purest essence, there are two constituencies that matter:

  • Customers
  • Employees

The Merger Verger does not see this issue as a chicken/egg problem.  I believe that the interests of the customer should carry the lion’s share of the weight in any name change discussion.  (I have no doubt that there were plenty of old-time brokers opining fervently against dropping the Smith Barney name but, believe me, they’ll get over it.)

For a small-to-medium sized business, the core question to address before making the decision to keep or change a brand is this:

  • Which brand can be best leveraged to pull the combined companies toward their long-term strategic goals?

I would ask that question in the immediate context and in the context of how the strategically expanded business should look two, five, ten years from now.  THINK CUSTOMERS.  If the change is appropriate within any of those horizons – even the very long one – I would either make the change now or set the path down for doing so over a known and finite period of time.

If that decision is made with objectivity and strategic vision, your next step is communication: sell the change, making clear what it stands for and how stakeholders will be better off for the combination charging forward under the new flag.

Oh, right: then deliver on what you’ve said.  Don’t forget that part.

Consider Graybar.  Obviously in the face of using a small acquisition to launch a new, potentially national business unit, the Hansen & Yorke name had to go.  They just did it too fast and communicated their intentions too little.  Don’t make those mistakes.

Personal Note:

Speaking of final good-byes, I said mine today to my long-dead father’s best friend, Chillie Callman.  I remember him fondly from my growing up years and again from my years back home as an adult. A good man gone but after a life lived fully and generously.  Thanks Chillie. RIP.